Bear Stearns (BS) is one of the most respect investment banks around, when they’re not losing billions of dollars, that is.
Robert Peck is, I’m sure, a smart fellow. He’s got a CFA, after all. He issued a report saying that social networking is an area Yahoo! needs to invest in. Paid Content linked to the report, as did Tech Crunch today.
This is all nice and dandy, but there’s not a lot there that’s new. Peck argues that Facebook, social networking’s #2, could fetch $5-7B in a sale. Incidentally, we did the math too, and said that Facebook would get a low bid of $3.3B and a high bid of $6B. We also said that Facebook would get more in an IPO, but at present revenue figures, the stock would head down, because unlike google who was doing over $1B in revenue when it IPOd, Facebook makes $100M-$200M per year with no sign of breaking through to $1B any time soon.
All to say, we laugh back at some of the things Henry Blodget said in the first era, and we get shocked and awed by some of the moves firms like BS do today, yet when they issue such reports, we seem to act like a bunch of fanboys without questioning the merit of the report in question.
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WatchMojo NewsletterWashington Post’s earnings release, via PaidContent:
– The newspaper publishing unit’s revenue totaled $227.9 million, a decrease of 7 percent from $245.6 million last year. Print ad revenue at The Post fell 13 percent to $128.4 million, from $148.3 million in Q206. Classified recruitment ad revenue dropped 22 percent to $13.2 million. The magazine publishing division had $73.4 million in Q2 revenue, a 13 percent decline from $84.2 million last year.
– Online publishing revenue, primarily from the washingtonpost.com, rose 11 percent year-over-year to $28.2 million in Q2 from $25.3 million.
It’s pretty simple, tally the losses, tally the gains, it’s not a promising picture. How quickly, and unreasonably, must online grow for print companies before their offline business escontinue to shrink?
But, credit is due to Washington Post, one of the stronger newspaper companies.
Some stats from my earlier post, Stop the Newspaper Obituary, Please, while most newspaper companies are doing worse, WPO is doing relatively well:
Washington Post’s 2003 sales as of 12/31/2003: $2.957B
Washington Post’s 2006 sales as of 3/24/2007: $3.904B
Washington Post’s market cap as of 12/31/2003: $6.181B
Washington Post’s market cap as of 3/24/2007: $7.32B
That’s not too bad. But then again, Warren Buffett doesn’t invest in crap.
When your tagline is the Internet’s most comprehensive video search, you better deliver.
My acid test for all video search sources is a quick one for WatchMojo.com. Since we produce a lot of content and syndicate it all over the Web, I can quickly see how a search service gets its content and how far it digs up.
Today we look at Vezoom, a product of Monetize Media: “your query watchmojo.com found 1641 videos”. We have about 4000 clips, so that’s a decent catch.
A little side note, when you try to copy and paste any data, you can’t. Which is odd, because video search companies build their value on top of other people’s content, yet this site objects to you copying and pasting any data, but, I digress.
Vezoom is wading into a very competitive market: search players such as Blinkx and Pixsy are trying to become leaders in the space, and both leverage metadata in RSS fields to index video content, as does Vezoom. Then there are many other players like Mefeedia, Dabble, Clipblast, SearchforVideo. Oh, did I mention Google, too? Each one is different in its own way, for sure, but in search, the technology is secondary to distribution. Unless you can put your product in front of an audience, I don’t think you have a long term prayer.
To Please the Lawyers
Disclaimer #1: we index both Blinkx and Pixsy in Mojo Supreme’s meta video search, MetaMojo.com (whose other produst is a vertical search network). At some point we could technically be indexing all of the sources in this post.
Disclaimer #2: we run the MetaMojo.com which very broadly competes in this space, but as you can see from Disclaimer #1, it’s a collaboration and not a competition with us.
Disclaimer #3: We produce video content at WatchMojo.com, and most of these sources index us directly or the syndication partners we distribute our clips to.
Would we include Vezoom in MetaMojo.com’s meta video search?
Don’t see why not… though ultimately, for better or worse, I suspect that Blinkx (who seems to be moving towards hosting content as well), Pixsy and Vezoom largely return the same data based on the same metadata.
Waiting for Turning Point in Video Navigation (or did we miss it?)
In other words, we’re still waiting for the tipping point in video search and navigation. With text content, some consider Google’s PageRank as being the leading force while others think that the moment came when Yahoo! chose to power its results with Google, trumping the fledgling startup to the top of the heap.
In video search, no one stands out. Though by buying the top file sharing and hosting service YouTube and owning 50% market share in search, Google is king of the mountain no matter how you look at the market.
Regardless, some highlights of Vezoom, from the press release:
With the myVeZoom personal video engine, this problem is solved by the creation of channeled video feeds scoured from both UGC and professionally produced content. (…)
The myVeZoom personal video engine saves users the daily hassle of trying to find what online video interests them. Your myVeZoom page becomes a custom tailored video channels experience that updates dynamically. You can even create your own channel on the fly by entering a keyword. Instantly your channel is generated right before your eyes. MyVeZoom is YOUR video WHEN and WHERE you want it. Once set-up, myVeZoom becomes one-stop access to see your video favorites without searching.
Currently myVeZoom offers over 60 online video channels. The usual suspects are here; YouTube, CNN, ESPN, Yahoo! and Google as well as some more obscure video sites such as Stupid Video, Video Spotter, and AniBoom. Users select the channels from a list of available category options, and then personalize the layout of the page by dragging and dropping their favorites into position. MyVeZoom continuously monitors over 18 million hours of online video for videos of relevance, providing new content for the user based on their favorite selected channels.
Notice the 18M hours? What does that mean?
Does Size Matter?
Well, to put it into context, Blinkx just months ago bragged about 6M hours… and now, on its site, it’s up to 14M hours.
For a second, this reminds me of how in Search Wars 2003-05 Yahoo! and Google bragged about the respective size of their index. At one point, Google claimed 8B pages, Yahoo! countered with 16B pages. Wow. More crap? Thanks.
Let’s face it: size does not matter… and I respectfully think the video competitors are going about this the wrong way by trying to index more and more hours of video because as you can see with the WatchMojo.com example, our 100+ hours of content is probably ubiquitous and on numerous sources… we’re a professional producer of content, when it comes to UGC or pirated content, there is a duplication of content as well… so by aiming for more hours, you are effectively creating a redundant database of content.
How about the one video I want in lieu of the same video from 4 different sources.
What if a video source could differentiate between UGC and professional content.
Blending File Sharing Features with Search
Much the same way that some video file sharing sites allow users to create channels and playlists… this is a search company that is trying to mesh those features of file sharing sites with search.
Will it work? I don’t know.
But it’s a very early stage in video so the more players, the better. So check out Vezoom and compare to the other players.
What will be the Brass Ring Look Like?
All I know is that there seems to be a crazy amount of supply of file sharing sites, video search… determining which ones will win and which ones will lose is a hard thing to do. It’s hit or miss, and frankly, at this juncture, with video ads being anywhere from a $4.3B to $10B market, I’m not even sure what the prize is. Then again, will the winners be search companies or the file sharing sites.
You know my bias: I think good content companies that are essentially agnostic to any one technology, platform, distribution point or search company will win, and I know of one pretty aggressive one out there…
In admitting that Google might have over-hired, Eric Schmidt made me think that Google was in some ways becoming like Yahoo!, who itself went on a hiring binge that pushed up its headcount to over 12,000.
Of course, with the government looking to block Google’s $3.1B deal for Doubleclick, Google is also becoming reminiscent of Microsoft…
Yahoo!, is today sounding a lot of like Microsoft, who wants to defend its software business and take on:
- Google in search
- Yahoo! in web portals
- Sony and Nintendo in video games
- Apple and Sandisk in digital music players…
How so? Today Yahoo! said it was going to make one more run at YouTube in video, while it continues to make dents in Google’s search business. Oh, it’s also trying to become relevant in social networking, after being turned down by Facebook last year, rumors crept up that it was eyeing Bebo, UK’s largest social network, but no Facebook.
Ah, the more things change…
As I was writing out my previous post Memo to Yahoo! RE: Video and trying it with “Will Web Video Represent $150B in market value creation by 2011 for web startups?” something occured to me:
The economically optimal thing for old media companies is NOT to acquire web video startups but actually simply invest in them.
The reason is simple: startup companies get a much higher multiple than old media companies do, so as these startups grow, fight for the $4.3B-$10B that online video advertising will represent by 2011 and rise in value, they provide with a capital gain opportunity for investors.
But, old media companies are not exactly investors, they are integrators of companies into operations, hoping to yield a strategic value of sorts. The problem, or disparity here is simple: a $4.3B-$10B online video ad market is paltry next to the $75B TV advertising market, so the opportunity for income is slim, with limited upside.
It should be noted that CBS Interactive has been very aggressive in investing in companies, and NBC set up a $250M investment fund managed by Beth Comstock, with a first investment in Adify. So, they’ve done the math, too, I suspect. Then again, other firms, like News Corp., “don’t lease, they buy”.
Regardless, the math suggests, old media is far better off investing and leaving independent these media companies… because at the kind of multiples that Web companies command, a $10B ad market for web video could represent a $150B market valuation. Those are, after all, the figures for Google’s 2006 revenues and market cap respectively.
A basic math reinforces this:
Say you are really lucky as a TV company and buy a company X that gets 10% of the online video ad market, some basic, straight line math suggests that they get anywhere from $430M to $1B in revenue. We chose Disney as the media stock of 2006 as a benchmark. As I write this, according to Yahoo! Finance, its P/E is 16.3 and its P/S is just under 2, at 1.93. Forget earnings, let’s just look at Sales. If the company X does $430M to $1B in revenue (10% of the $4.3B to $10B estimates), that adds a lot of potential income (depending on Disney’s Degree of Operating and Financial Leverage) but it only adds,
- at the low range, 1.93 x 430M = $829M
- at the high range, 1.93 x 1B = $1.93B
for an average of $1.37B in added market cap.
Disney, it should be noted, is currently worth $68B in market cap, so that means about 1.5-3% of its value. Pretty paltry. Admittedly, an annuity of $430M to $1B adds a lot of a company’s market cap… but it’s not exactly a perpetuity as revenues for such companies go up and down quite a bit.
But by investing, if the same company does 10% market share, and using straight math once again, then at the high end of $10B in revenue and $150B in market value, company X can command a $15B market cap.
There are other variables, ideally an old media firm would buy 80.1% of a startup to consolidate financials, but leave them independent so they can remain lean, mean and a capital gain building money machine. But at anything over 10% equity, as the math shows, old media is probably better off investing and not buying.
It’s really challenging to be a TV executive these days. If you look back, you see what happened to print companies, if you look forward, you realize you’re caught between a rock and a hard place.
New day, new video strategy for an old, new media company.
According to Mike Folgner, Yahoo’s general manager for video, the world’s largest portal wants to essentially create a big video portal by aggregating, under one roof, “music videos, movie trailers, television shows and sports highlights”.
A few comments and observations:
- On the surface, Yahoo! is set to embark on the very same strategy that made Google Video ultimately fail (compared to its sheer dominance in search, a Top 10 video property is hardly a failure, of course), forcing Mountain View to buy YouTube in an unprecedented $1.65B acquisition. I’m not the only person to point this out, by the way, Om Malik does too.
- But, I disagree with Om on two points. #1 is when he says that destinations don’t work, hmm… Yahoo! is the world’s largest destination, funnelling some traffic to videos is pretty simple for them. #2 is Google was a technology company who could not really editorialize content, Yahoo! is masters of taking content, aggregating it and making it into a nice package, or allowing its users to do it. I’ve been on MyYahoo every day since getting online. If Yahoo! allowed a MyYahooVideo it would be pretty solid. In fact, WatchMojo.com’s new CMS will allow just that… for people to use their own channels with our proprietary content. But enough shameless promo for now.
- One more point on the myth of destinations: sure, grabbing video codes and embedding them or sharing them on file sharing works for some, but for Yahoo!, a destination with good video programming is overdue.
The problem is, once people get there, then what?
- A few years ago, movie trailers could pass off as premium content, heck, iFilm built its business on it. But today, users are more savvy and there’s enough pirated “good stuff” on sites like YouTube et al. that users see movie trailers for what they are: ads.
- Moreover, they can see those trailers without pre-roll ads on sites like YouTube, so seeing them with ads on Yahoo! will fail.
- Google is public enemy to content holders in old media, so if I were Yahoo!, I’d borrow from their text content strategy of the late 1990s and license all pieces of old media content. That is, of course, what Joost has done (disclaimer: another distribution partner of WatchMojo.com). This is become harder and harder though, Quincy Smith has led CBS to ”open-source” selected CBS video content on selective sites… so it’s not like Yahoo! could get much content exclusive. And, of course, let’s not forget News Corp. and NBC who have declared Jihad on YouTube with NewSite/NewCo. But, old media’s bravado aside, they’re not crazy: you will never see the lion’s share of old media’s libraries online. We’ve covered this ad infinitum in:
- Understanding TV executives Angst and Envy
- Web Video Represents $150B market cap in 2011, but not for TV companies
- Digital Revenues are Never Incremental for Old Media
- Will TV companies face same fate at Print Companies?
- If You’re Old Media, What Would You Do?
That’s why, my gut says that before long, old media companies like Viacom, CBS, NBC, ABC, FOX will start buying up companies that create made-for-web, professional, ad-friendly, evergreen content. That allows them to keep the good stuff offline but have an online video strategy, too, that involves more than mere “movie trailers and outtakes” which before long get, well, too commercial-ish. Of course, the optimal thing to do is to invest and not acquire companies, see the math here.
Since old media’s content is going to be hard to unlock and move online, then Yahoo! needs to get the best stuff from made-for-web producers, yes, like WatchMojo.com. Frankly, while Yahoo! is part of WatchMojo.com’s Original Video Syndication Network, they have been slow to act, react and frankly, it’s their loss… because more of our content is on Yahoo!’s competitor sites and ultimately, users care about content, not platform, and not the URL.
- Another thing that is odd about this news: a couple of years after buying Flickr and failing to tweak it to allow video sharing and include Delicious’ tagging (which, had they done, would have been YouTube, by the way), Yahoo’s Flickr photo-sharing site will also be adding video, he said. That’s just odd, I think, because it creates two distinct video sites, something that I thought they wanted to avoid with Flickr, after they shut down Yahoo! Photos, no?
With all due respect to Yahoo!, you do get a sense that it’s unclear what they’ll do. Immediately after that they want to bundle content under one roof, they add: “One of our strategies is to put video everywhere you are on the Internet”.
The obligatory stat from comScore:
Yahoo wants to attract more visitors to its site at a time when more than 130 million Americans are viewing online video, based on ComScore Inc.’s May figures. Of the 8.36 billion streams viewed that month, Google, which acquired YouTube last year, accounted for 22 percent, Reston, Virginia-based ComScore said. Yahoo was third at 4.6 percent, behind News Corp.’s Fox pages, which includes social-networking site MySpace.
Disclaimer: I own shares of Yahoo!, which by the way, I kinda regret not dumping after the last round of MSFT/YHOO rumors spiked them 18% in one day, only to pummel them back into the low $20s, but that, trust me, in another post, coming soon.
